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Power Ministry for pooling imported, domestic gas prices

The Power Ministry has proposed to pool prices of imported and domestically produced natural gas to be supplied to power plants stranded by a drop in production of the fuel from Reliance Industries' KG-D6 block.

The ministry floated a Cabinet note last week to seek approval to pool imported liquefied natural gas (LNG) with the fuel available from the KG-D6 block after meeting the requirements of fertiliser units. The move is aimed at helping gas-starved power plants.
'In the year 2014-15, around 3,000 MW capacity power plants will get gas under the gas-pooling mechanism. The electricity produced from these plants will be sold at a tariff of Rs 7 per unit,' a Power Ministry official said.

The proposed electricity tariff was derived after pooling the prices of imported and domestic gas and deducting government subsidy, which requires approval, the official said. The tariff may increase to Rs 7.50 per unit in 2015-16, when gas will be made available to additional power plants.

'In the financial year 2015-16, the remaining 4,800 MW capacity plants will also be able to get gas,' the official said, adding that 7,800 MW of gas-based power generation is stuck due to scarcity of natural gas.

He added that the rise in electricity tariff has to be shared by the government and consumers.The proposal will be finalised once the Finance Ministry agrees to provide the subsidy. State-run GAIL India will be the facilitator for the price-pooling mechanism. The price of KG-D6 gas was set at $4.2 per million British thermal units by the government and is proposed to be doubled from April 2014. LNG costs about $13-14 per mmBtu. Gas production at the KG-D6 field fell 53 per cent to 49.2 billion cubic feet in the April-June quarter from a year earlier, Reliance said in July. Output has declined mainly due to geological complexity, natural decline in the fields and higher than envisaged water ingress, the company said.

Last month, an Empowered Group of Ministers headed by Defence Minister A K Antony approved the sale of KG-D6 gas to power stations, after meeting the needs of urea plants.
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